Wednesday, June 20, 2012

Chart of the Day: Share of World GDP, 1-2008 AD

Click to enlarge.
Bottom Line: Free market capitalism is the best path to prosperity illustrated, or how a minor British colony became a world economic superpower with free market capitalism.

42 Comments:

At 6/20/2012 8:53 AM, Blogger Hydra said...

China appears to have been doing well since 1960, by this measure.

 
At 6/20/2012 9:10 AM, Blogger morganovich said...

hydra-

i think you may be mistaking the growth in the line above china (non asian ancient civ) for china. it makes the red line look like it is growing in the 60's and 70's when it is, in fact, just getting pushed down.

china did not really grow until the 80's. this is coincident with the beginning of deng xiaoping's economic reforms. agriculture was decollectivized in 1978, industry was reformed, and the country was opened to foreign investment for the first time since before ww1.

the sudden increase in chinese growth coincides very tightly with these reforms which seems to bolster mark's statement.

 
At 6/20/2012 9:40 AM, Blogger Buddy R Pacifico said...

The growth of China's state capitalism share of world GDP growth is impressive.

If China were to become a free market captialist country then it, and countries it trades with, would have astounding growth.

 
At 6/20/2012 2:48 PM, Blogger rjs said...

2011 growth rates:

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html


1 Qatar 18.70 2011 est.

2 Mongolia 17.30 2011 est.

3 Ghana 13.50 2011 est.

4 Panama 10.60 2011

5 Turkmenistan 9.90 2011 est.

6 Iraq 9.60 2011 est.

7 China 9.20 2011

 
At 6/20/2012 2:51 PM, Blogger bart said...

Excellent chart!

 
At 6/20/2012 2:53 PM, Blogger bart said...

By the way, an off the radar item - Africa has been growing by leaps & bounds lately.

http://www.businessinsider.com/29-of-the-worlds-fastest-growing-countries-2012-6?op=1

 
At 6/20/2012 3:00 PM, Blogger PeakTrader said...

Before 1820, the masses were dirt poor:

The Contours of World Development

"From the year 1000 to 1820 the advance in per capita income was a slow crawl — the world average rose about 50 per cent. Most of the growth went to accommodate a fourfold increase in population."

By Angus Maddison - Educated at Cambridge, McGill, and Johns Hopkins universities, before teaching at the University of St Andrews in Scotland.

 
At 6/20/2012 3:03 PM, Blogger juandos said...

"how a minor British colony"...

Well I had assumed this posting was actually about Hong Kong as the preeminent example of free market capitalism at work and NOT China per se...

Considering that Hong Kong has no natural resources to speak of other than a fairly good deep water port it never fails to amaze me at how well their economic activity has in a sense pumped up that part of the world...

Would Shanghai of today be what it is if it weren't for the shining example of Hong Kong?

I'm guessing not or at least not yet...

 
At 6/20/2012 3:08 PM, Blogger PeakTrader said...

It should be noted, in recent years, the U.S. consumes up to $800 billion a year more than it produces, or consumes other countries GDP.

 
At 6/20/2012 4:18 PM, Blogger Hydra said...

Geez Morganovich. It is an AREA chart. The area in red represents Chinas share of word GDP over time.
In 1820 When Chinas share was at its max in 1820 it represented 97% (the non asian line boundary) - 55% (at the China / India boundary) = 42% of world GDP at that time.

The area in red represented by each annual slice begins to increase around 1960 , but as you point out it becomes readily apparent at a later date.

The lines really have nothing to do with it since the chart is really a continuum of stacked bar charts with the amount of red in the bar for that year repreenting Chinas share.

The chart is misleading because it is presented as a % of the total, making it appear as if GDP is a fixed pie. As you pointed out in another context, "Who cares what the share is as long as everyone's amount of pie keeps growing?"

 
At 6/20/2012 4:35 PM, Blogger Larry G said...

" The chart is misleading because it is presented as a % of the total, making it appear as if GDP is a fixed pie."

yup. translation.. yet another data swamp.

 
At 6/20/2012 4:35 PM, Blogger Larry G said...

This comment has been removed by the author.

 
At 6/20/2012 4:48 PM, Blogger bart said...

The chart is misleading because it is presented as a % of the total, making it appear as if GDP is a fixed pie.

There is no such thing as a chart, or even a small series of charts, that can represent any complex area like world GDP for 2000 years... aka, TANSTAAFL too.

Stated another way, every chart is misleading - even the ones that don't intend to be.

 
At 6/20/2012 6:04 PM, Blogger PeakTrader said...

It seems, the Roman Empire represented about 25% of world GDP, while China and India represented 70% of world GDP.

 
At 6/20/2012 6:12 PM, Blogger PeakTrader said...

Roman Empire Population

"The population of the world circa AD 1 has been considered to be between 200 and 300 million people.

In that same period, the population of the early empire under Augustus has been placed at about 45 million.

Using 300 million as the world benchmark, the population of the Empire under Augustus would've made up about 15% of the world's population."

 
At 6/20/2012 7:18 PM, Blogger PeakTrader said...

So, the U.S. is a greater "empire" than the entire Roman Empire, at its height, particularly after WWII, and with only 5% of the world's population.

 
At 6/20/2012 8:21 PM, Blogger morganovich said...

hydra-

"
The area in red represented by each annual slice begins to increase around 1960 , but as you point out it becomes readily apparent at a later date."

no, it doesn't. my point, which you seem to have missed, is that is just looks that way because the area of the region above chine increased. it's an optical illusion. you see china as growing because it is further from the edge, but what is real driving the move is the region above it. the area of the red is not going up.

china's share of global gdp was about the same in 19675 as in 1950.

http://photos1.blogger.com/blogger/8020/421/1600/worldgdp.gif

the chart is not misleading. it's a share chart. it says nothing about the overall size of the pie, nor was it intended to. it's a way to gauge relative growth rates.

if you gain share, you are growing faster than the average of the rest of the world, if you grow more slowly, you lose share.

you are looking at a speedometer and calling it misleading because it does not show you how many miles you have gone.

 
At 6/20/2012 8:26 PM, Blogger morganovich said...

larry-

"
yup. translation.. yet another data swamp."

nope. translation: you do not know how to read this chart and extract the information it contains.

see comment above to hydra.

as bart said, no chart contains ALL data. this is a chart to show relative growth rates, not absolute nominal growth. far from being a "data swamp" it's just a specific visualization tool to look at one issue. this says nothing about overall increases in human production and claiming it should is like claiming that you ought to be able to drive nails with a screwdriver.

you are just taking a useful tool and trying to use it for the wrong task then complaining that it's useless.

ask yousrelf: if you saw someone trying to drive nails with a screwdriver, would you agree that the tool was worthless, or might you perhaps consider that the person using it has no idea how to use tools?

 
At 6/20/2012 8:27 PM, Blogger morganovich said...

that should read in 1975 as 1950.

 
At 6/20/2012 8:31 PM, Blogger morganovich said...

also note:

just gaining area on this chart does not mean you grew faster.

it's all growth relative to others.

if the world slowed down 2% and you slowed down 1%, you would still gain share.

this chart looks at one, narrow thing: relative growth rates. however, that thing is a good gauge of comparative performance of economic systems in terms of GDP (which, of course, is a very limited and in many ways flawed way to measure growth and prosperity).

all measures are imperfect as are all presentations of them.

that's why you need to understand what they are trying to do and what they are and are not good for.

 
At 6/20/2012 9:31 PM, Blogger Hydra said...

Ok, you didn't grow faster, just relative to the others.

Has there been a time in recent history when world gdp shrank?

 
At 6/20/2012 9:34 PM, Blogger Hydra said...

I don't see the optical illusion. It looks bigger to me. Ill print it out and measure it.

It is a minor point anyway, we agree it grows more later.

 
At 6/20/2012 9:37 PM, Blogger Hydra said...

Maybe he hasn't got a hammer.

 
At 6/20/2012 10:45 PM, Blogger kmg said...

Some of the data is flawed, as PPP GDP is being taken. While that metric has some merit, you cannot do a piechart of world GDP with it.

 
At 6/20/2012 10:46 PM, Blogger kmg said...

India currently holds the title of 'Most Declined Former Superpower'...

Both China and India declined terribly over the 1820-1975 period. But Chine is regaining fast.

India is not fast enough...

 
At 6/20/2012 11:16 PM, Blogger JakeW said...

Interesting note: There appears to be a sliver of US GDP at year 1000.

 
At 6/21/2012 7:43 AM, Blogger JohnV.Walsh said...

The most striking comparison is that between India and China. India was richer than China at the time of their independence - late 1940s- and both had and have roughly the same population. India, however, never pulled completely free of the Western colonial powers - China did and decisively so. You will notice that China's decline stopped upon liberation in 1949. And there was growth after 1960 - 18 years before the post-Mao reforms. During the time from 1949 to 1978, virtually the entire population was made literate whereas India's level of literacy remains pitifully low. And China also embarked on a program of health care - barefoot doctors to be sure but they brought basic health care to the entire country. India saw nothing like that.
Two lessons. For really striking growth, two things are necessary. First an educated populace, and that was accomplished during the pre-1978 slower growth rate period. Second, a country needs a country dominated by the West should get as free as possible and re-enter the world on its own terms.
One cannot ignore colonialism, neocolonialism or the US Empire in considering the meaning of charts like this.
But the chart is still useful especially when accompanied by the historical facts to which I alluded above

 
At 6/21/2012 8:03 AM, Blogger Jet Beagle said...

JohnVWalsh: "Second, a country needs a country dominated by the West should get as free as possible and re-enter the world on its own terms."

Really? How would you reconcile the world-leading economic growth of Hong Kong as a British colony from WWII until 1997?

I'm not arguing that colonies fare worse when they become independent free market economies. I'm just not convinced from your conclusions about your small sample - China and India - that independence and education are the keys to economic growth. As the British demonstrated with Hong Kong, a nation can be a colony and still enjoy economic freedom.

As I see it, John, economic freedom is far more important to growth than political independence.

 
At 6/21/2012 8:43 AM, Blogger Jason said...

Looking at a few sources, China's 2008 GDP was $3.4T while the US's was $13.9T. So...how is it that their "share" of world GDP in the chart appears to be the same (~25%)? Inflation factors are gummed up, but not by a factor of 4, for crying out loud.

Additionally, I question the share percentages for Russia until the 90's. I don't believe Stalanist Russia had 12% world share any more than I believe China's GDP growth predictions or, for that matter, any more than I believe the the US's headline inflation numbers.

I wonder if this chart represents national WEALTH, and not GDP...

 
At 6/21/2012 10:04 AM, Blogger Jet Beagle said...

jason: "Looking at a few sources, China's 2008 GDP was $3.4T while the US's was $13.9T."

I'm pretty sure you are quoting GDP in nominal dollars. Angus Maddison, the author of the chart, used GDP on a PPP (Purchasing Power Parity) basis. I can't easily find 2008 GDP (PPP basis) figures, but the World Bank does provide 2010 GDP (PPP):

1 United States ... 14,582,400
2 China ........... 10,084,764
3 Japan ........... 4,332,537
4 India ........... 4,198,609
5 Germany ......... 3,071,282

 
At 6/21/2012 10:11 AM, Blogger Jet Beagle said...

Jason: "I don't believe Stalanist Russia had 12% world share any more than I believe China's GDP growth predictions"

I'm not sure what data Angus Maddison had available to him. He may have been forced to use the Russian government's reported GDP figures even though he knew they were inflated. For that matter, I doubt Stalin himself would even have access to "real" production figures in Russia. Back in those days, no one in his right mind would have sent poor production numbers to Moscow.

 
At 6/21/2012 11:52 AM, OpenID moneyjihad said...

I would have thought that Spain would have had a much higher share of world GDP from the 1500-1700s.

 
At 6/21/2012 12:55 PM, Blogger Jet Beagle said...

moneyjihad: "I would have thought that Spain would have had a much higher share of world GDP from the 1500-1700s."

Well, GDP for Spain only includes what was produced in the geographic nation Spain, not in its Western hemisphere colonies.

Angus Maddison's GDP data, which we can assume was used for this chart he created, shows that Y1000 to Y1600 growth in China and India dwarfed what was happening anywhere in Europe.

Prior to the Industrial Revolution, GDP was likely highly correlated with population. The population of Europe was decimated by the plague in the 14th century, and didn't recover for centuries. Although the Medieval outbreak of the plague started in Asia, I don't think the impact there was nearly as great as in Europe. So Maddison's estimates of GDP prior to the Industrial Revolution probably reflect the changes in relative populations of Europe and Asia.

 
At 6/21/2012 4:58 PM, Blogger morganovich said...

jake-

"Interesting note: There appears to be a sliver of US GDP at year 1000."

sure. people lived here then. they hunted buffalo and built long houses in the north east woods etc.

the us region had an economy long before it was a country.

where they got the states for iroquoi venison production is an interesting question, but it stands to reason there was economic activity here.

 
At 6/21/2012 5:04 PM, Blogger morganovich said...

"Has there been a time in recent history when world gdp shrank?"

there have certainly been countries that had gdp shrink.

also realize, it works the other way too.

if you just grow more slowly and others stay where they were, you lose share. over time, it's a huge deal.

the us had lower growth from 2000+ than in the 20 years prior.

interesting stat i just grabbed from the book mark helped write:

if us gdp growth had been 1% a year slower since 1850, we would be no richer than mexico.

 
At 6/21/2012 5:09 PM, Blogger Ron H. said...

"Interesting note: There appears to be a sliver of US GDP at year 1000."

Vikings. :)

 
At 6/21/2012 9:18 PM, Blogger Hydra said...

The us was a british colony that grew faster once freed of the yoke.

 
At 6/21/2012 10:04 PM, Blogger Hydra said...

I printed the chart out and measured it: John walsh is correct, Chinas growth started as early as 1960.

 
At 6/21/2012 10:07 PM, Blogger Hydra said...

"Has there been a time in recent history when world gdp shrank?"

there have certainly been countries that had gdp shrink.

===============================

Yes, but world GDP?


What if we reacha point where world GDP is more or less static? Then this chart will get very interesting.

 
At 6/22/2012 7:09 AM, Blogger Jet Beagle said...

hydra: "The us was a british colony that grew faster once freed of the yoke."

The U.S. grew after the 18th century because of many factors. Among the major ones:

1. early removal of France from the northern U.S. borders
2. Louisiana Purchase
3. removal of native Americans on all fronteirs
4. constant influx of immigrants from Europe

Independence did allow the colonies more market and legal freedoms. But it would be incorrect to ignore the many other reasons for U.S. economic ascendancy.

 
At 6/22/2012 7:12 AM, Blogger Jet Beagle said...

"There appears to be a sliver of US GDP at year 1000."

Angus Maddison apparently uses ancient population estimates to derive GDP estimates in regions where no history is available. North America did have a thriving native American population 1,000 years ago.

 
At 6/24/2012 8:10 AM, Blogger Realist Theorist said...

Interesting chart. What would it look like if GDPs keep moving so that per-capita is equalized across the world? In other words: if GDP becomes proportionate to population.

Curious to find out, I extended the graphic.

 

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